Glory days

Weather forecasters are calling it the Frankenstorm. “We don’t want to hype this thing too much,” one of them said a few hours ago, “but it has the potential to be the worst in a century.” That would mean $5 billion or so in damage from New York to (maybe) Toronto.

Hurricane Sandy is a handy metaphor. It’s gigantic, natural, ugly, unstoppable and you know misery will be left in its wake. What else would so perfectly describes the Boomers? These wrinkly isotopes have blasted their way through the economy for the past six decades and the biggest blow could be yet to come. The implications for real estate – and their adult children – are huge.

First, remember that it was the Boomers, all nine million of them (a third of the population), who created a demand wave in the Seventies and Eighties, creating inflation, stupid housing prices and Cindy Lauper. Today you’d think they’d be rich, since they sucked up all the best jobs, binged on real estate and lived their working lives amid constant income gains and economic expansion.

But, sadly, just the opposite now seems true. Boomers are broke. Or damn close. Consider this:

Over 70% of Boomers have no corporate pension. And yet over half of people aged 50 to 59 have accumulated less than $100,000. What the hell do they think they’ll live on?

Almost 75% of people did not contribute to an RRSP last year. The average savings rate was 20% in 1982. Thirty years later it’s barely over 3%.

Over 60% admit they’ve failed when it comes to retirement preparedness.

Over 50% of folks in their 60s will be retiring with a mortgage to pay. Almost 30% expect to still have one at age 70.

The average income for retired Boomer families now (over 65) is a measly $37,400. The average CPP payment for retirement is a mere $529.09 a month. The average OAS is $514.74 monthly. Who actually believes they can live on this, and say they are enjoying life?

And yet 70% of Canadians, and closer to 90% of Boomers, own real estate.

Which brings us to the stat which should terrify their children (and every homeowner): A third of all Boomers say they’ve only one way to fund their retirements, which is by selling off their real estate. I suspect the number who will be cashing out is far higher, but this alone amounts to about a million houses hitting the market – when housing’s already going into a funk. By way of comparison, the total number of homes sold in Canada last year was 456,749.

Of course, all those houses won’t get listed at once. It’ll take a decade or so for the wave to sweep through, but it will likely happen as interest rates edge higher and house prices continue to be impacted by a slow economy, swampy incomes, tighter credit and off-the-chart levels of household debt. I’ve said before on this blog that demographics is the elephant in the room everybody’s ignoring, including the government. Yesterday’s news that plans to pay off the national debt have been pushed back by at least 20 years (and even that is a fantasy) should give you an idea of what lies ahead.

Of course the burning question is who’s going to be buying these million Boomer houses, and at what price? Will the wrinklies today with fat houses but scant savings and no pension be able to raise enough to stagger through until their eighties and beyond? And what about the 52% of Baby Boomers who say they’ve put zero away for long-term medical care? Do they all think they’ll just keel over?

Eighteen years ago I wrote a book pegging 2015 as the start of a retirement crisis based entirely on demographics and a Boomer love affair with real estate. Little did I know that in 2012 we’d have record home ownership and record debt at the same time. I never imagined the savings rate would collapse or half the people hitting 60 would have less than a hundred grand invested plus a mortgage in retirement. In other words, nobody listened. Or, not enough.

Obviously if you’re a Boomer with most of your net worth in a house, waiting to sell means you might have to develop a taste for Alpo. Five years from now you could be shocked at what somebody’s willing to pay for that particleboard palace in the burbs. If I’m right, we’re in for a long stretch of asset deflation and price inflation. In a world like that you need income and liquidity.

At the event in Toronto on Monday I told twelve hundred people to expect this shift. From the dominance of the middle class to its demise. From the accumulation of stuff to the ascendancy of cash. From real commodities, be it houses or metals, to financial assets.

The Frankenstorm may miss us. Boomageddon won’t.

212 comments ↓

#167 GTA Engineer on 10.19.12 at 5:16 pm
Will the world be using less food, energy or iPads? I think not. — Garth

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Well, we’re one-third of the way there. Today’s AAPL earnings announcement was, you guess it, a disappointment. Earnings rose but by less than expected. iPad mini will cut AAPL’s margins, and questions are circling around AAPL’s strategy overall. iPad sales have plummeted from 17 million in fiscal Q3, to 14 million in Q4 (missing expectations of 15.5 million). I fear AAPL’s peak is slowly approaching, if not already passed. Their visionary Steve Jobs even once said that 7 inch tablets were bad ideas:

“7-inch tablets are tweeners: too big to compete with a smartphone and too small to compete with the iPad. ….7-Inch tablets are dead on arrival”, and also:

“..here are clear limits of how close you can place physical elements on a touch screen, before users cannot reliably tap, flick or pinch them. This is one of the key reasons we think the 10-inch screen size is the minimum size required to create great tablet apps.”

Ok, so that’s AAPL. The other fun news today is from Amazon, who reports their first quarterly loss in *4 years*, as well as missing revenue (that canary in the coal mine I referenced in earlier posts) by $100M. In addition, they guided Q4 revenue even lower (from $22.8bil to a range of $20.25bil-$22.75bil).

Like earlier misses, these are not good signs for the stock market. Hope you all got out when you could – it’s not too late to take some money off the table and watch the fireworks (and buy when, as our fearless leader Garth puts it in relation to real estate, risk is removed (ie. prices drop)). Why buy when risk is at all time highs? Because you think we’re cheap due to low P/E’s? You can see where those ‘E’s (earnings) are heading, so the snapshot P/E of the market today no longer matters, as the trajectory for earnings is now trending negative.

My mom is totally in this situation already. She is 77 and won’t sell her house because she can’t face the prospect of moving. She has lived in this same house for well over 50 years. It needs tons of work and its no longer suited to her but she is trapped in a prison of her own making. She has minimal income… Just enough to cover the house expenses and her subsistence.

At one point she thought about getting a reverse mortgage but it really wouldn’t solve the real problem plus financial advisors advise against it. By the time she (or we) have no choice but to sell I worry that selling will be difficult.

She truly believes that if she even attempted to move that it would be the end of her. Getting sufficient home care to help her stay where she is could become astronomically expensive and she couldn’t pay for it because all her money is in the house.

“You’re more screwed than you think” is the message and the numbers only prove that. May heavens help us get through all this… My friends keep buying houses in Maple, North of Major Mac “because it’s a good location”, regardless of what I keep telling them. The ones that bought already even get angry at my words.
Can’t wait to laugh like this:http://www.youtube.com/watch?v=ca9GuwuOVZc

In an attempt to speed up the court case, and because of the amount of money and time it would take to obtain all the evidence, ***ONLY 10 polling stations out of 236 in Etobicoke-Centre are being looked at.

AS WELL for the same reason (lack of time and cash), Borys did ^NOT file complaints about voting disruption and the robocalls that went on from the CONS.

………….

From article link: There were a number of reports on May 2, 2011 about disrupted voting at a polling location at a seniors’ centre.

Borys has affidavits from Elections Canada employees detailing these disruptions from Ted Opitz’s campaign manager and other CON staff. Also new immigrants were targetted by the CONS. Not to mention all the robocalls.

Here’s a good summary of what happened at one poll in Etobicoke Centre:

No one disputes that during the last election in the Toronto riding of Etobicoke Centre, a poll at a seniors’ home was shut down and people couldn’t vote for a while.

Borys Wrzesnewskyj, the former Liberal MP in Etobicoke Centre, successfully went to court to have the May 2, 2011, election results in the riding overturned due to ballot irregularities. Conservative Ted Opitz, who won the riding by 26 votes, has appealed the decision to the Supreme Court of Canada.

Affidavits filed by three Elections Canada polling staffers at this poll, number 427, describe a Conservative named Roman who arrived at the poll in the morning and “suddenly started screaming and waving his arms wildly … He was raging in a bullying fashion, which caused confusion, and frightened many voters.”

But Roman Gawur, Optiz’s campaign manager, has a different version of events: “I remained calm and only raised my voice to overcome the surrounding noise in the room,” he said in an affadavit filed in response to Wrzesnewskyj’s original court filing.

Elections Canada allows residents in seniors’ homes to use the voter identification cards they get in the mail as ID, because they often don’t have a driver’s licence and their health cards may be held by the residence’s administrator. However, their names must be checked against an official residents’ list, and Gawur says he thought this second step was not being taken, so voting was stopped.

Through access to information, CBC has obtained Elections Canada’s correspondence about the incident.

The timeline and notes reveal that the deputy returning officer at the poll gives a different reason about why Gawur wanted the poll shut down.

“The (D)RO reports that a candidate’s rep has tried to stop proceedings at poll 427 because the rep does not believe that it is a registered retirement home and the vic [voter identification] cards are not acceptable ID,” the report says.

That account is at odds with Gawur’s own affidavit, in which he is clear that he knew that seniors in this home have a special exemption.

The Elections Canada report says that at 10:02 a.m., Allan Sperling, the returning officer for Etobicoke Centre, “is trying to get details about whether the rep actually stopped the proceedings or is just being obstructive.”

It also noted that the deputy returning officer called Sperling three times during the incident, and used the word “obstruction” about what was happening.

The poll reopened after about half an hour. A pause of that length in a long voting day might not have been a problem, but on this morning, a bus was waiting to take many of the residents for a day’s outing to Casino Rama, an hour and a half’s drive from Toronto.

Gawur and another Conservative scrutineers admit that some seniors may have not voted because the bus was leaving and they didn’t want to miss it.

In your opinion, will the looming slide in Canadian house prices be more or less (percentagewise) than the plunge in prices we would have seen starting in 08-09 (had there not been a massive intervention to stop it)?

Most of us on here use pseudonymous names. Garth does not. He makes his points, he insults, and compliments.

He’s not afraid to speak his mind, chirp old friends, right or wrong (left) he does not hide his opinions. In Today’s machine controlled world this is a rare form of breviary by someone so well known. How many main stream media personalities of his caliber have an opinion out there? None, Zero, Nada.

Gartho is one of a kind. Uses a Real Name lets it all hang out. Personally I would be terrified.

It took a tone of courage for me to walk up on that stage, introduce myself as the smoking man, and shake his hand. Especially being the resident Looney on this board. How many of you sane ones did.

So here we all write from the cloak of anonymity, yet apart from beach girl, most of you whether Pro Real Estate or Pro Crash do not exceed learned behavioral boundaries.

WHY?

Who can judge you, you say something really stupid, change your pseudonymous name and you’re back in business.

I have said some crazy shit on here over the years, and some cool stuff too, but the fact that I have been consistent and unafraid to let it all hang out (Before A and pasted Z) whichever way my chardonnay induced mood takes me , as turner nation points out, I have a large following. And that’s a scary thought, un chartered territory for me. I may need to tone it down a bit.

The most valuable thing I learned was why Hollywood loves Canada. Your politeness is sickening, your accommodating let’s not get in their space Canadian wimpiest thing.

I had hundreds of eyes follow me around the bar at the Gartho show, yet a slightly past prime was the only one courageous enough to ask.

So keep pumping out well behaved, afraid of being judged posts. I will do my thing.

OK, we kicked out the walls, spilled the sticky punch all over the carpet, overturned the furniture, left the dirty plates and cups and ran up the party budget. Now let’s invite the twenty-somethings in to clean up the mess and try not to let the door hit us on the way out.

“Eighteen years ago I wrote a book pegging 2015 as the start of a retirement crisis based entirely on demographics and a Boomer love affair with real estate. Little did I know that in 2012 we’d have record home ownership and record debt at the same time. I never imagined the savings rate would collapse or half the people hitting 60 would have less than a hundred grand invested plus a mortgage in retirement. In other words, nobody listened. Or, not enough.”
—–

It doesn’t matter if “nobody listened…or not enough”, Boomagedon is literally a fraction of the real problem. Boomers are simply poster children for the heart and soul of the financial system.

Yep. The financial system and it’s dynamics. The real elephant in the room. To give you an idea of how denial works, consider a five billion dollar debt for a hurricane. Worst in a century. You say that’s terrible. Why would you say that?

How could a five billion dollar frankenstorm be a big deal when at the same time JP Morgan’s 70,000,000,000,000 in derivatives ponzi isn’t worth a mention.

You’re not listening, stuck 18 years in the past. Refusing to look at or talk about what happened. It sure ain’t boomergedon.

You might not know this garth but the gov is no longer informing people what their rrsp contribution limit is. Last year I got no information on my limit. I had to contact them to find out my limit. I’m a maximizer. My conclusion over this “oversight” is that they probably don’t WANT me to contribute! They are probably wondering what kind of old school reprobate I am to even think about maxing my rrsp. They would prefer us all to be happy slaves sitting amongst our “stuff”.

I agree whole heartedly with this post, however, income gains have not been constant.

Household income has increased, for sure, but single worker incomes have been largely stagnant for 30 years. A mild increase at best. Boomers have enjoyed the largest era of consumption in part because Mom went to work. She was generally paid less than Dad, but that allowed consumption maintain its level and in time, increase.

9 million boomers and 90% of them own houses. Only 1 million will hit market ? You imply rest are financially stable to not have to necessarily sell their home ? …since you say more than half of them have less than 100k, should the number not be about 2.5 million ?

I referenced the bank study I quoted instead of, like you, making it up. — Garth

Garth, you forgot to follow up your boomer theory with your other two oft mentioned points. That is boomers will somehow magically be convinced to sink their house proceeds into the stock market and that there will some group of people to lead another consumer resurgence. I severely doubt this is going to happen.

#11 Julia – moving an elderly person is not the best idea, as have seen them die months later; too many from my experience. The worst mistake I have ever made in my life was executing a Power of Attorney to sell my dad’s home to move him elsewhere. The change was too much for him, and he died in a few months thereafter.

Garth wrote: ” The average income for retired Boomer families now (over 65) is a measly $37,400. The average CPP payment for retirement is a mere $529.09 a month. The average OAS is $514.74 monthly. Who actually believes they can live on this, and say they are enjoying life?”

Actually I’m enjoying retired life on $33,000 a year in Cowtown (not yet eligible for CPP or OAS; I’m 57). Of course I also have $1.2 million in assets (bullion, oil, Canadian bank bonds and dividend stocks) plus my house was paid for in 1997 (zoned R-2, so my heirs can build a rental apartment).

All of this while working a regular day job but not just putting cash into term deposits. Lots of day trips during my working era to the adjacent Rockies instead of expensive trips to Hawaii. Driving Honda Civics instead of Beemers. No large-screen TVs, no upgrading to a new iGadget every year just because they brought one out.

I have lots of fun in retirement without spending a bundle. When it comes time to go into a nursing home twenty years from now, I can liquidate my assets, convert them to an annuity, and wait for the mortician in peace.

Yo Garth: Enough Doom and Gloom; your message in Vancouver was that in spite of a housing correction, other markets will survive and thrive even. What changed? The sun shone in Vancouver today. houses are still selling (for less admittedly), but life goes on. Boomers come, boomers go; who cares. In 25 years most of us will be dust. Check the obituaries; not everyone makes it to 85 or even 65. Thanks for all the good advice; my plan is to do the best I can and enjoy life while it lasts.

My guess is that the majority of boomers won’t sell their homes. Most likely have paid-off mortages and will live on savings, OAS and CPP – those with pensions can expect a comfortable, rent-free retirement life. The number of boomer houses entering the real estate market will thus insignificantly drive down prices. Besides, the North American economy is picking up and the real estate situation in the US is improving, to the point where Canada’s home-owners, including boomers, will be cushioned from a downturn, in a way that Americans were not. Relax.

#22 Observer on 10.25.12 at 9:56 pm
OK, we kicked out the walls, spilled the sticky punch all over the carpet, overturned the furniture, left the dirty plates and cups and ran up the party budget. Now let’s invite the twenty-somethings in to clean up the mess and try not to let the door hit us on the way out.
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I think that more light should be shed on the difference between the notional value of the derivatives and the bank’s netted out position in them. To me, the ‘hedge’ point you made would mean little in the event of a chain reaction of counter-party claims on say, credit default swaps or interest rate swaps for instance. There would be an instant ‘Mexican stand-off’, as many have outlined already. Perhaps John could speak to this point and relate it to the way the credit bubble is dragging out in the EZ without a sovereign default yet?

Boomers will stay in cash, and foreigners prefer gold and cash and millennials will shun the debt based consumerism of the last generation, therefore the DOW will be sideways for the foreseeable future.

“Almost 75% of people did not contribute to an RRSP last year. The average savings rate was 20% in 1982. Thirty years later it’s barely over 3%.”

In the 80s people were in the habit of saving because credit cards weren’t as common (were they even used yet?) and debit cards were non-existent; you had to save before purchasing something- imagine! I remember on Fridays my parents saying “Have to get to the bank to get some cash before it closes” because that was all the money they’d have until Monday- no ATMs yet. That might have been the 70s..? My point being, when life was like that (oh, how old I sound :0) it was just ingrained to save. No surprise that with the advent of credit, personal savings have plummeted.

I loved how Toronto developers complained about the effect the new CMHC and Loan to value ratio rules were having on their business.

It’s called state-capitalism, and it cuts both ways. Where were you when horny virgins were snapping up your particle board villages like hotcakes, largely thanks to the taxpayer funded CMHC assuming the risk no private lender could afford?

Do goldsmiths and stockbrokers demand government action upon every fluctuation in the value of their commodity? Does the government need to backstop beef and fertilizer? Whither the day Apple sells no more iphones, these annoying developers can call for a government takeover.

Sorry for the rant but I am sick of everyone piping up every time the chips are down and complaining government owes them a living. Keep expenses low, pay down debt, save a % of whatever you earn and manage it wisely. Read here and other non mainstream sources often to find out how

I have been thinking about this for a while. There are 25% more people 45-65 than 0-20. Including mortality it is 30%. When all these people retire there will significantly less people around to buy these houses. This still has a while to play out though. Generally people sell their houses 10 years after retirement. This does not however take into account how broke these boomers are. The peak of this group is still over 10 years from retiring. I think housing prices will decrease and then grow below inflation for 20 years.

#42 HDJ: “My guess is that the majority of boomers won’t sell their homes. Most likely have paid-off mortages and will live on savings, OAS and CPP – those with pensions can expect a comfortable, rent-free retirement life. The number of boomer houses entering the real estate market will thus insignificantly drive down prices. Besides, the North American economy is picking up and the real estate situation in the US is improving, to the point where Canada’s home-owners, including boomers, will be cushioned from a downturn, in a way that Americans were not. Relax.”

What “savings”? Is this how realtors interpret statistics? — Garth

For the record, this is the second or third time you’ve wrongly guessed that I’m a realtor. I send corrections, but you keep repeating the same mistake. I know you’re a busy guy, but not a good sign. Time to switch to a nutritious vegan diet?

Great post. There is another factor along with the boomers themselves that will exacerbate the housing glut: the quality of these homes. For example, my father’s house was built in the 1960’s, was poorly insulated and his kitchen was straight out a 1970’s catalog somewhere. No open concept, small bath and kitchen. He passed away and the neighbors bought it but their house is no better. Small, needing work and poorly insulated. Awful floor pan. I’m sure that majority of these boomer homes won’t be appealing to the potential buyers of tomorrows houses except for lot value.

First, remember that it was the Boomers, all nine million of them (a third of the population), who created a demand wave in the Seventies and Eighties, creating inflation, stupid housing prices and Cindy Lauper.
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C’mon

Solution is simple…..

Expand the number of MP and Senators to equal the number of retirees,say to 9 million…..hence gold plated pensions….problem solved.

Excellent post!! Its the sheer size of the boomer cohort that make the world go ’round. Why would this fact be ignored so much when it comes to Real Estate is beyond me. The large numbers have an incredible impact on everything, absolutely everything! Ignore at your own risk. Everyone in this group is on the same retirement plan (selling home, living on proceeds)….I hear it at least once a day from clients! Glad Im out early!

Best post ever. I haven’t read all the comments, because I have a partial life. But this year, and financially I will survive to at least a 100, and I do not like being addressed as a wrinkly, alot of my fellow boomers are in distress.
My version on life as I see it, young people are getting ass jacked. Maybe we have to live communally.

Garth, I have a circle of close friends made up of 7 couples plus two single friends and myself who are 62-70 years of age. All but one couple are retired. All of us are debt free except the couple that are still working. I live in a medium size city in SW Ontario. I don’t think we are unique or special. We all worked the expected 30-35 years, some professionals some not, raised families, divorced, lost husbands/wives. Some of us have more money than others but all of us are no where near the profile of the “Boomers” you talk about. We all live in homes or condos, some own, some rent. We all travel and are enjoying retirement. Where are all of these people that are buried in debt?
I am not arguing against your premise that too many Canadians of all ages have taken on too much housing debt and consumer debt and have not taken care to invest in their retirement but why wouldn’t I extrapolate my circle of friends to the larger community? What is different about my “Boomer” friends? (ok that may be a loaded question so be nice) Just saying that I am not seeing the stress you are talking about. If I am leading a charmed life, God willing it continues:). Thanks for the blog and BTW I sold 15 months ago at a peak thanks to reading your blog. I’m liquid, balanced and a bit of a cowboy!

Well some people have commented on the fact this is not a Facebook site. But unfortunately our young bi-bolar man was removed from our weird home.

Hi Smoking Man.

But in all honesty, we will try to get him back. Now it is just the tattoo artist (I have none), 2 girls that work at Dominoes. I do not need the money. But we are happy. Halloween party will be awesome.

Also, I am very attractive, I enjoy the company, and do not wish to marry ever. Night. Some shithead will diss me. Bring it on.

Garth, my accountant claims that if you set up a corporation and buy dividend bearing shares of eligible companies (i.e. blue chips) through it and flow out the dividend to the shareholders, the effective tax rate is miniscule, as low as 5%. Is that true?

54 – EIT – read (at least in part) your links from the other day. But please re-read my first comment regarding deflation – good if you have savings (like me) but bad if you have debt (like so many).

The one link mentions the deflation that came with increased productivity. Both articles make an interesting point regarding prices – how they are relative and not absolute. So if we halve all costs and incomes we dont have deflation. Likewise we could double both and have no inflation. But either affect our financial system of debt and savings, which are simply promised and stored
labour.

Inflation is the more familiar problem, and can be
targetted by monetary policy. Do you remember 1982? And maybe 1991? Battling deflation is more difficult, with the popular analogy being you cant push on a string.

[…] Weather forecasters are calling Hurricane Sandy a Frankenstorm. “We don’t want to hype this thing too much,” one of them said a few hours ago, “but it has the potential to be the worst storm in a century. It’s huge, unstoppable and will leave misery in its wake. It’s a perfect analogy for another ugly storm that is brewing that Garth Turner at the Greater Fool Blog has coined Boomageddon to describe the 9 million strong, 20 year wave of Boomers retiring, deep in debt with little to show for retirement savings. The leading edge of this massive wave has already retired. A full 1/3 of them plan to downsize to fund their retirement. Garth predicts they will have a significant negative impact on housing for decades to come as they will find few buyers willing or able to take their over-inflated homes off their hands. Continue Reading […]

Another interesting point is that Canadians in their 40s and 50s were supposed to inherit a waterfall of cash and assets from their parents and I know some just waiting to cash in. BUT if the boomers actually will have to eat their house assets to exist then goodbye inheritance.

No surprise that with the advent of credit, personal savings have plummeted.

There is a step between “credit” and “no savings”, and that’s “impulse buy”. Which you can’t do if there’s no money in your wallet.

Trivially remedied with the use of another invention “from back then” called “a budget”. Maybe the youngins could make some use of those thousand dollar iPads they tote around (what do people do with those anyways?) and drop a buck on a budgeting app. There is an app for that, is there not?

I would link the SNL skit “don’t buy stuff you can’t afford”, but NBC is on a crusade to rid the world of copyright infringement.

Average household income of $37,400 (over 65’s). That in itself is ugly. Even uglier, that is the “average”. Absolutely frightening to think of just how many 65er households are living on less, and how many of these, much less. Very sad.

#42 HDJ – Just google ‘Boomers sell homes for lifestyle’ and you’ll get the drift. Your viewpoint, ” The number of boomer houses entering the real estate market will thus insignificantly drive down prices..” – alas is not supported in any forums, media or revues that can be found with just a bit of research.
Get ready for a rush of “Cotton tops” heading out riding waves in Hawaii, skiing the bluffs in Aspen and mountain biking in Whistler. Sell now why your property is worth something…..

Garth, I love today’s post AND I love your drive-by comments. You should knock some more people down a few pegs for saying stupid things. It’s great fun! I write complaint letters to companies all the time. The funnier the letter, the more swag you get. You should see my Unilever collection of towels.

Speaking of Unilever, I met David Foot about the same time as your book came out (Did you notice how similar you two look, but if I had to make a call, you’re better looking). He wrote BOOM BUST and ECHO (HELLO? hello, hello, hel…lo?) and listening him go on and on like a beatnik poet, it occurred to me, that maybe I should put a little cash into Shoppers Drug Mart, and Unilever. It was a good call. Unilever was about $10 in 1996 and now it’s around $38! (Yes, I AM sexy, and yes, I do know it.) Now, is that a sign of intelligence on my part? I don’t know. If listening to you now provides me good advice to make money the way David Foot did back in 1996, well here I am!

In today’s post you mention how all these old people aren’t just going to keel over or hope on an ice flow to go out and die. Who knows where they’ll be in 5-10years. The body has a multitude of ways of shutting down itself. It could be short and sweet like an anuerysm or long and drawn out, like Parkinson’s. Or like ones I’m noticing more of, self-inflicted. Old folks falling and can’t get up. Last week, I saw this old lady trip over a speed bump, and because her reflexes aren’t like a cat’s any more, she didn’t have enough time to put her arms out and break the fall. She landed flat on her face! A crowd formed and all passerby’s stopped and offered her help and called an ambulance. I gave her a germ removal wetknap. Normally, old people falling was funny, like someone slipping on dog pooh on a sidewalk, but now it’s getting creepy. That sound of some old person in trouble gives me nightmares. Not a month goes by without seeing someone go down for no reason. Soon it will be every few weeks, then every few days. It will be like something out a horror movie! I don’t go grocery shopping during the day because I don’t want to have to see some old guy on the floor, in front of the deli counter, crying in pain. Think Old Man Simpson in a bear trap.

“I think that more light should be shed on the difference between the notional value of the derivatives and the bank’s netted out position in them. To me, the ‘hedge’ point you made would mean little in the event of a chain reaction of counter-party claims on say, credit default swaps or interest rate swaps for instance. There would be an instant ‘Mexican stand-off’, as many have outlined already. Perhaps John could speak to this point and relate it to the way the credit bubble is dragging out in the EZ without a sovereign default yet?”
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Yeah, of course you’re right. The secret lies in the old “bullshit baffles brains” refrain. It’s absolutely the biggest part of this.

1. Hedged bets don’t save the burnt dinner. Why? Because of what you say in your post. You need a ponzi scheme and suckers like Canadians to buy cheap “money” from the international banking cartel. Take that debt machine out of the equation, what happens.

2. Debt ponzi dynamics ( global) are always avoided…why do you think the boomer focus popped up? Does it mention the source of the credit bubble and the real problem-situation-challenge-opportunity? Nope.

3. Europe is just planned oxygen reduction to get people to accept a new private Federal Reserve style criminality in Brussels. Is the “hedge” factor a “wash” on that one? No. Check what the new banking supervision rules in Europe will include: Veto power. Germany and France should have the move set to go before Christmas…even sooner if they can threaten-sell-actually allow/create war.

4. Emerging markets are still on the plate to shift around power chips before the musical chairs song stops. Chile is the site for some planning. Spain, France, Italy, Colombia, Mexico and the head of the European Comission will all be there January. Chile even printed up bonds in New York yesterday. Check CNN. Stories on Santiago and Chile are popping up.

Lagarte will be in Viña del Mar, Chile in December ahead of the meeting. Goldman Sachs Mario “three card” Monte will be in Santiago, so will Hollande and Borroso, all selling Brussels and looking to get as much of South America on line as possible. Germany’s position will be promoted by proxy.

Yeah…interesting stuff. But it can be played long too. People are on pharma medication, processed food, porn, TV and youtube…completely in another world. So they really don’t care.

Spend 35 minutes on the net, the info is all there. Watch what happens when you post up anything real…anywhere. Not much. And the “doomer” loonies are selling hard too. So the people who don’t want to know can just “write off” what’s going on as “conspiracy” ( oh so 2010).

The derivatives ponzi has to deleverage and can’t. In the meantime, power brokers are moving chips around. Debt is still selling pretty well.

Just a thought about the savings rate. Could the acces to money or credit be responsible for the decline in personal savings? In the 70s and 80s credit cards where not as common as they are today and the ATM wasn’t even invented yet. People had to go to the bank to get money. I suspect this has a lot to do with the decline in savings. Being able to access money at any time has contributed to impulse shopping and ever rising consumer debt. Today some people don’t carry cash at all, you see this at Tim Hortons, the grocery store, the gas stations etc transactions as small as $1 are being paid for with interact cards.

Interested in seeing what a significant portion of your retirement will actually look like? Then take part of an afternoon and visit a nursing home or care home, and have a good look around. Every resident you see was once your age and most had full physical and mental capacity, leading active and productive lives.

Despite what the retirement planning industry says in their TV ads, you’re not going to be parasailing in the Caribbean when you’re 82. For most, retirement will develop in three stages: go-go, slow-go, and no-go. It is crucual, therefore, to construct a realistic retirement plan which accounts for the decline in mobility and mental functioning, and the acceptance of the strong possibility of spending some time in a long-term care facility.

‘Asset Deflation and price inflation”
Gart, when are you going to stop using such a confusing statement. Don’t assets have prices associated with them? I think you have explained this in the past and what you really mean is price of commodities will inflate and prices of fixed asets will deflate. Get with the program man, stop the Gartho talk.

Assets have values. Goods and services have prices. How hard is that? — Garth

Wow this is really surprising news, somehow you have stats for the 2 years of boomer families that are 65 and 66 today and their income is only 37,400. For the cohort older than them, the average income is $59,400 meaning that senior boomers incomes are more than 35% lower than the older cohort and yet nobody has noticed this phenomena yet.

Wow does this mean that maybe they didn’t “get all the good jobs” the ones with the fully-indexed pensions and such or maybe they were turfed out at 55 and had to use up their retirement savings to live on. Nope it must mean that they were wastrels going on cruises and such throughout their lifetime, somehow finding great jobs with no pensions and not saving a dime.

I should think if any other demographic had a sudden 35% decline in income that this would be front-page news but since it only affects those nasty boomers, it’s neither here nor there.

Hong Kong’s government announced its first property tax targeted at overseas buyers, stepping up efforts to cool home prices as U.S. monetary easing and record-low interest rates raise the risk of a bubble.

Non-local buyers will have to pay a 15 percent tax upon purchase, Financial Secretary John Tsang told reporters at a press conference today. The government also raised a resale tax on property by about 5 percentage points and extended the period during which it will apply to three years from two, he said.

I think this is an extremely scary topic for most over 40. Most realize that no matter what they do from here on in (saving, investing, work harder) they aren’t going to have near the spendable dollars they do now. And their life style is going to several huge steps backwards. Being mortgaged to the nostrils today (and technically broke) might be good training for the future though : )

I’m picturing a lot of trailer parks in the future …. and many little remote northern towns filling with Buicks with the left turn signal always flashing and hunched over people with walkers. Near poverty living is in the future for most. It’s the only scenario the math supports.

I see more and more 50+’ers gathered at the lottery trays at the variety stores. They realize deep down inside that this is their only hope (the odds?). But I agree with a few bloggers on here, that we will just adjust to the new life style and make the best of it. There will be so many old people in 10 – 20 years that there will be options not seen today. Things will adjust down to their level. There will be too many to ignore.

Another freebee for the boomers.
Do the boomers get a property tax supplement? I think i read somewhere that they get help from the Gov with the property taxes at retirement. Is this true? How much do they get?

I guess when we retire these programs will not exist, since they are unsustainable.

“The average income for retired Boomer families now (over 65) is a measly $37,400. The average CPP payment for retirement is a mere $529.09 a month. The average OAS is $514.74 monthly. Who actually believes they can live on this, and say they are enjoying life?”

>> That is why we need deflation.

The future of Canada will be more like a current developing country in that housing will be cheaper, and credit will be tougher to get.

Wages will be lower. Basics like food, utilities, transportation will take a larger portion of your income.

…But in Canada taxes will be much higher…can’t let down the government pension recipients can we…

Few people are saving today because there’s little reward to do so. A low-interest environment is discouraging. Is it, however, a great time to pay down debt which, sadly few people are doing. Instead they misinterpret it as a chance to get more stuff for cheap. And you know what? – if they buy and then pay it off at the right time – they’d be right about that.
Basically governments owe so much debt that they keep rates low so they can make payments – so the people holding the loans have to live with minimum gains from it. Since the governments can’t pay off their debt anytime soon, rates aren’t going to budge for a long time.

The average income for retired Boomer families now (over 65) is a measly $37,400. The average CPP payment for retirement is a mere $529.09 a month. The average OAS is $514.74 monthly. Who actually believes they can live on this, and say they are enjoying life?

wow, What a hypocrite.
Garth slams people who lust for granite and stainless steel, and at the same time writes that seniors cannot live on less than $3k per month if they want to “enjoy life.”
Unless they have, or endorse, a sense of entitlement (like you apparently do, sometimes) they can easily live on $3k.
Oh, but wait, you slam the sense of entitlement that causes young people to buy fancy houses they can’t afford. hmmmmm

“Another freebee for the boomers.
Do the boomers get a property tax supplement? I think i read somewhere that they get help from the Gov with the property taxes at retirement. Is this true? How much do they get?

I guess when we retire these programs will not exist, since they are unsustainable.”

Who cares? Have you wondered about the personal loss of power that happens when you start even thinking of a nanny state “giving” you anything? Freedom is lost. Dignity gone. Social cohesion and community eroded.

The average annual single family residential listing inventory has averaged 1,309 units. This current year of 2012 the average monthly inventory has been sitting at 1,990 units which is more than twice that which it averaged monthly in 2002 at then just 813 units of available inventory. But that is not the whole picture as there is more to consider when determining the market dynamics.

While the over the last ten years average annual inventory of available homes has been 1,309 units on average there have been 1,436 expirations per year (homes which did not sell). More precisely in 2011 there were 2,077 homes the listing of which expired without a sale. This year is not yet over so I can’t give you the exact number of expiries for it but can tell you it is trending toward the same. That number for 2002 was just 954 listings that expired without a sale. So expirations too increase with increased inventory levels substantially mitigating that increased supply.

And then there are the number of new listings taken in any given year and month. On average over the past ten years there have been 30% more new homes added to the existing inventory on a monthly basis. Of course, as we all know, the peak listing month is March which averages 39% new adds to existing inventory levels where December is the low listing month which averages just 18% more inventory added to the system typically.

More telling however is the annual numbers of new additions, expiries and sales against the, at any given time, existing inventory levels.

For example in 2002 there were;

On average 813 active single family residential listings throughout the course of the year
There were in that year 2,757 sales (339%)
There were in that year 3,580 new listings taken (440%)
And there were 954 Listings which expired without a sale (117%)

Those numbers for the last complete year (2011) were;

On average there were 1,912 Active listings available for sale throughout the course of the year
There were in 2011 1,946 sales (102%)
There were 5,285 new listings taken in 2011 (276%)
And there were 2,077 listings which expired without a sale in 2011 (109%)

Now on the surface the supply demand quotient of those respective numbers might reveal some alarming appearances but we need to dig deeper.

First let’s look at 2002 a year in which there were 339% more listings sold than the average number of listings available in any given month that year. What started to happen in 2002? Answer; Prices started their dramatic ascent. Average price rose from $191,322 in January of 2002 to a whopping $596,875 at its peak in April of 2008. If you look closely at those statistics again you will see that in that year of 2002 you had closer to your six months of inventory and what it did to prices.

We don’t want six months of inventory Form Man for when we get there prices you can be sure will not just begin to rise they will begin to skyrocket once again just as they did in the early years of this last decade. The Twelve months of available inventory we have today in Kelowna is a good thing as it moderates price increases. We are holding steady and ought to give the current inventory levels thanks for it.

Another interesting statistic is the number of new builds added to the system. While I do not have readily at hand the number of new builds in Kelowna for each of the last ten years, if you check out the statistics on the Homeowner Protection Office website where it gives the number of new builds added to British Columbia in each of the last ten years you will see, and you should know this being a builder yourself, that it ramped up from 1,786 dwelling units in 1999 to a peak of 38,774 units (WOW) in 2007 (peak volume year for real estate sales then too) and has since dropped back to 22,455 units in 2011. Interestingly on that same page the HPO shows that the number of Builder licences issued has not waned to any significance after having ramped up from 1,206 in 1999 to a peak 5,645 in 2008. Clearly the internal competition amongst builders mirrors that of the internal competition amongst REALTORS®. – interesting…

Now there are, of course, many ways to look at statistics and I am sure you will be able to slice and dice those I have provided above to suite your own agenda. Clearly to the naked eye there are some dramatic disparities and I am only too happy to share them with you and the readers here knowing they can be manipulated to say pretty much whatever you want them to say. But what I see within those statistics is:

Yes inventory levels are at historic highs but so too are the numbers of expirations which clearly says to me that a good number of those listings are offered by sellers with unrealistic price expectations and as such they are only willing to sell if they get their price and we both know that just ain’t gonna happen. So what are real inventory levels today after you remove those which are really not on the market? I think they are a lot closer to six months’ worth of inventory than twelve. And what of your claim that prices will not rise until we are down to six months’ worth of inventory? I personally don’t think you want to go there as I do believe that when that time comes we will be headed into the same market conditions we were headed into in the early part of the last decade and we all know how that worked out.

Also the number of new builds reported to have taken place in the hay days for your industry clearly shows an unsurpassed level of greed on all fronts. It is commonly understood that a large part of the problem is not increased inventories of resale homes but the increased levels of available new builds especially in the condo market. But, oddly enough, condo sales are actually increasing at a faster pace than single family residential. We are, believe it or not, working through those excess inventory levels at a comfortable pace – maybe not so comfortable for the spec builder who has been waiting a year now to sell that spec he built at 2008 prices but that is a risk he ought have known inherent in building a “spec.”. So I can understand, as one in that industry listening to your lamenting builder buddies, you must think thing all gloom and doom. It’s just not so. We are in a reparatory phase not a tearing down phase. The ‘tearing down’ has already taken place and the renovation begun.

The fact still remains both Kelowna unit sales volumes and average price have held steady for more than four years now. I cannot fathom how anyone on either side of the equation could not see that as a positive thing.

So slice and dice those stats above to your heart’s content. They are what they are just as this market is what it is and there isn’t a thing you can do about it but make the best of it you can here now and today because NO ONE knows what tomorrow will bring but we do know what we have to work with today. Yes I have put something of a positive spin on it but I have given too the hard statistics above so that you can make your own informed decision. So decide away.

But rather than decide make choices. Choices are more kind and forgiving. You know what words end in ‘cide’ don’t you? They all mean some form of termination. Don’t burn bridges, build them instead.

P.S. pardon the long comment but there are some interesting stats in there I think you will all appreciate, and that I will abstain from posting anything further today.

You forgot to mention we make up 30% of voters in this country, we will vote as a block to get what we want and are still firmly in control as it applies to the political landscape. Politicians will do nothing to piss off the Boomers, for now anyway.

You said: “And “We Boomers” didn’t create Cyndi Lauper…. Cyndi Lauper was a creation of Generation “X” in the 80′s.”

Cyndi Lauper IS a baby boomer and she was made famous by other baby boomers. According to Wikipedia, Cyndi Lauper was born in 1953. Also according to Wikipedia, the baby boom generation is the cohort born between 1946 and 1964. So Cyndi Lauper was born almost in the middle of the baby boom–she is TOTALLY a baby boomer.

Lauper’s first album (and the one that made her famous and continues to be her most well-known work to date) was “She’s So Unusual” released in 1983. I am a Gen X-er as I born in the 70s. In 1983, I was just a kid–I was not out buying records. But I remember my mum (who is a baby boomer, born between 1946 and 1964) bought the Cyndi Lauper record in 1983. I remember my mum singing along to “Girls Just Wanna Have Fun” and “Time After Time” etc. So it was boomers like my mum who made Cyndi Lauper a successful musician in the 80s.

I generally agree that baby boomers have harmed future generations. But I have to admit that I think Cyndi Lauper is one of the best things the baby boomers ever gave the world. I still love every song on “She’s So Unusual” and her later work as well. Cyndi Lauper has a beautiful and powerful singing voice. She is far better and more talented than the poptarts of today like Lady Gaga and Rihanna.

I’ll sum it up… They interview a couple virgins and a few realtors… Pretty much says all is good here and now is a great time to buy, even if you have to buy something smaller, or dilapidated or in a neighborhood you might get shot. Get a second job at the new Tim Hortons to help pay your mortgage because owning a house trumps all.

Garth, I gotta disagree with your “view” that boomers will be unloading properties within the decade. My old stomping grounds in the small corner of North West Toronto – formerly the City of Etobicoke – well, in the late 70 and 80’s – we were the last group of kids – our older brother and sisters were known as the official end of the baby boomer group.

Well, I have frequent the neighbourhood and the same old people are still about. Living in their 50’s bungalow style ranch homes. I would bet most are in the mid 70’s or early 80’s. I do hear of a passing and a young immigrant family is likely to move in. But little has changed – no exodus here! And these are the parents of the “boomers”.

I don’t think most boomers are just gonna pick up and leave – if they have roots planted, unless physically unable too – why leave. They can always use the “reverse Mortgage” which gurantee’s them to stay in their home – though siblings will probably get buckis after the sale.

I think those boomer who currently live in mega homes of +3500sq.ft will be unhappy – no one will want those beasts. A ranch style bungalow is still if favour.
My post did not reference an ‘exodus’ but enough forced sales to seriously impact everyone’s equity. — Garth

It seems counter intuitive to me that my fellow Boomers who lived through a period that, with the exception of recessions, was fairly prosperous have little savings. What’s so hard about the idea of not putting all your investment eggs in one basket, namely housing? Even an idiot like me who failed a college financial analysis course understands that idea.

@Metro Van Observer, post #77:
I keep hearing this complaining about wages not going up, but if you look around you’ll see most people have more money than ever. I could easily furnish many homes with good furniture, and good working appliances that I’ve seen in many people’s garbage. While travelling on the 401 Highway in Ontario, in the right lane at the speed limit of 100 Km/hour in my fuel sipping older Honda, I see many big SUV’s, pickups, and other bigger cars flying by me at far above the speed limit. I see many people who spend a lot on their pets, houses are bigger than ever before (to contain all that stuff) and the list goes on. It’s obvious a lot of people have more money than me, and a lot more than most people had years ago.

“Over 70% of Boomers have no corporate pension. And yet over half of people aged 50 to 59 have accumulated less than $100,000. What the hell do they think they’ll live on?”

The succulent flesh of the young. If you believe the elite are engaged in a Malthusian endeavour to reduce population size, what better way than to have the old (who are already close to death) eat their young (who then can’t procreate). It’s genius. Is that why the gov is encouraging young immigrants from parts far east to move to Canada? Because we have a lot of boomers to feed!?

“A third of all Boomers say they’ve only one way to fund their retirements, which is by selling off their real estate.”

So, on a (slightly) more serious note, I’m sure many boomers will sell their homes and other real estate assets. But I think many more will be renting out parts of their homes. The greater value will be in the parts, rather than the whole. So, instead of renting out entire basements, they will be turning individual “spaces” into “nano pads.” Subdivided rec rooms, crawl spaces, storage spaces, cold cellars, sheds, closets, garages, utility rooms, attics (prime ‘high rise’ accommodations), shower stalls, and even the large cardboard box the fridge came in all present intriguing possibilities.

If they are smart about it, the boomers can even engage their collective creativity and promote these subterranean hovels, re-tasked enclosures, and previously uninhabitable gems as the next cool trend in RE. Maybe they can call it “destitute sheik.”

easy on the disgust there, Dupcheck. It depends on the province/municipality and individual circumstances. In BC you get a reduction if you’re a senior with a home under a specified assessed value. In Ontario you get a property tax credit – and not just seniors – geared to income. And in the City of Ottawa you can defer your property taxes until you die or otherwise dispose of your home if you are a low-income senior or disabled, paying interest annually on the deferred amount, of course.

Since property taxes based on current assessed value amount to a tax on unrealized capital gains anyway, some accommodation for people caught in the widening gulf between their ability to pay and what others recently shelled out for homes in their area should not be objectionable.

Don’t bother saving fro that nursing home. My mum has been is a wonderful one in the TO area for 8 years now and not paid a cent other than her basic CPP and SS. She spent all her money so the Ontario govt picks up most of the tab.

The lady in the next room, now she pays a mint for the same room, food and facilities because she was silly enough to save.

But all Canadians will learn that eating out in restaurants+tax+tips, Starbuck’s pricey coffees, owning new cars and taking annual southern vacations ARE luxuries.

That doesn’t mean a penurious and miserable life. I have a wealth of hobbies and activities, friends & neighbours, the Rock & Gem club, family, HUNDREDS of 50-cent VHS movies, record collection, hiking & photography…and time to actually read fiction.

When you reach your dotage free time is what you earn! You can get by on a very small amount of cash per month, but KEY is having a paid-off house and no DEBT.

Heard from friend (disclaimer – he’s a real estate professional) that any foreigner with $500K to spare can buy a home cashdown in Canada – That entitles them to walk into this country, and THEREAFTER apply for Landed Immigrant status. Upper-crust folk from the Middle East have apparently done just that, especially in the past 5years, contributing to housing demand in big cities.

Apparently a handful of states in the US are contemplating similar measures to boost their housing demand.

My question – Isn’t there enough demand among the world’s affluent to offset any over-supply of Cdn housing in the years ahead? Also consider the shacks you get in Europe for comparable money.

Maybe this is the secret behind all those shoebox-sized condos in downtown Toronto? The kids snapped them up at high prices, the value will drop 20%, Gen-Yers will move out (disgusted) when they’re 30 need room for kids–taking the mortgages with them, the values then drop even lower to around 30k, and the broke-ass Boomers will move in. …Because those condos really are low-cost seniors homes in disguise.

Kelowna mayor trying to sell the cheaper taxes/utilities than Edmonton/Saskatoon and cost comparisons in this article but higher taxes are coming ’cause housing prices are sinking – I think – I’m not sure what the mayor is up to?

Not saying I agree or disagree with you Garth, but there are other considerations for boomageddon. When you find you have much less income, you become a spendthrift. I live in a condo strata where the pensioners are always votnig down any and all initiatives to spend money. These same people I see probably do nothing but stay home and walk around the local street and malls. In other words, they’ll keep their real-estate place and make-do until they die.

And/or, they get help. From the government. From the kids. From their neighbors, from their church friends. etc. But, I suspect the last thing they will do is sell their real estate until they can no longer care for themselves.

Is that the point of life? Why accept the lowest common denominator? — Garth

“She spent all her money so the Ontario govt picks up most of the tab. … The lady in the next room, now she pays a mint for the same room, food and facilities because she was silly enough to save. … I have learned from this.”

That, in a nutshell, is what’s wrong with our society. Maybe the Malthusians are onto something.

#138 Jane54 – there are a few Insurance Companies that will insure for lifetime homecare or a nursing home on a premium term certain basis. Not a bad investment as the premiums are small in relationship to the huge liability, and the pay period is usually 20 years. It is just like any other insurance, and it is all about risk vs a future reward.

#138 Jane You are correct to a point. Long term home is the same price across Ontario for a basic ward of 4 people which is covered by OAS and gains being signed over to the home ,now the lady across the hall still gets her the same OAS pension but with some savings can afford a private or semi private room , hair and foot care ,extra medicines not covered by OHIP (vitamins ,etc.) maybe cable TV ,newspaper etc. if lucid .We all do not go from being able body to infirm and not being able to connect with the world .We are lucky there is a safety net for those that have nothing but it can not be fun.

Having great difficulty in understanding why retired boomers need to hang on to their houses. Speaking from experience as a retired boomer who started out in suburbia , then on through large ostentatious homes with acreage , pools, cars ,trucks ,RV’s , Harley,tractors and toys ,on to my now townhouse, I don’t miss any of it. The moneys in the bank, the pressure to keep up is gone and I can lock the door anytime, catch a plane or head out on the highway.
Too bad the entitlement and greed has resulted in the house becoming our identity, whether 30 or 80. Drive thru the fancy inflated overbuilt new subdivisions and ask who in hell would want one of those monster houses in 20 years (or even now for that matter).Highly unlikely my Grandchildren will be able to buy it. Not to mention the upkeep, repairs, heating/AC bills and the ever increasing property taxes.
My parents, during retirement, lived off the federal pension with a small house paid for. No RRSP and not much in savings. They lived to be close to 100 years of age and never wanted for anything, never felt entitled or moaned because they wanted more.
Guess the point is we expect too much. If it’s within your means, go to it. Boomers ask if it’s necessary to keep on the treadmill, buying status and paying taxes and fees that governments and bureaucrats piss away. I spent lots of time visiting the nursing home in the last few years of my parent’s lives. Which incidentally the government of BC picked up the tab on all costs above their pension amounts.Same care that costs 4k to 5K a month for those with large estates .In any circumstance, living in a care home is not a pretty picture regardless of your financial status , though sometimes necessary.
Doesn’t really matter how much you accumulate, in the end the government will take much of it in taxes or fees and the kids inherit the rest.
Recently had a friend pass away who just sold his farm for over 5 million $$.His last years were spent in ill health. He said “here I am with all this money and I can’t get out of this damn bed by myself “. That put things in perspective for me.

#85Jane24: “Another interesting point is that Canadians in their 40s and 50s were supposed to inherit a waterfall of cash and assets from their parents and I know some just waiting to cash in. BUT if the boomers actually will have to eat their house assets to exist then goodbye inheritance.”

Former leader Silvio who was found guilty of a multi-million euro tax fraud had his 4 year sentence reduced to 1 year.
Exaggerated costs of film rights that he purchased for his Mediaset television empire. Some of the assets were diverted to overseas slush funds in Switzerland and Hong Kong in the €200m scam.

Washington, D.C., Oct. 17, 2012 – The Securities and Exchange Commission today charged a former $1 billion hedge fund advisory firm and two executives with scheming to overvalue assets under management and exaggerate the reported returns of hedge funds they managed in order to hide losses and increase the fees collected from investors.

This is the seventh case arising from the SEC’s Aberrational Performance Inquiry, an initiative by the Enforcement Division’s Asset Management Unit that uses proprietary risk analytics to identify hedge funds with suspicious returns. Performance that is flagged as inconsistent with a fund’s investment strategy or other benchmarks forms a basis for further investigation and scrutiny.

“The analytics put Yorkville front and center on our radar screen,” said Bruce Karpati, Chief of the SEC Enforcement Division’s Asset Management Unit. “When we looked further we found lies to investors and the firm’s auditors as well as a scheme to inflate fees by grossly overvaluing fund assets. We will continue to pursue hedge fund managers whose success is based on fiction rather than fact.”

#162 Canadian Watchdog – the banks in Canada will weather the storm, but once again Garth is right, and the common shares might take a hit paying dividends, but the preferred shares have the same tax treatment, and in some cases the preferred bank shares pay more. So what of these two options do you want to be to protect your capital investment?

re: boomageddon and making do…Is that the point of life? Why accept the lowest common denominator? — Garth

—
Garth – I was merely pointing out that there is another possible outcome a boomageddon… not on real-estate prices, but on the quality of life by those affected.
In other words, boomageddon may not have as big an affect on real-estate housing price/sales as you think. Instead, boomageddon just hurts their quality of life.

You’ll be surprised… people will ‘make-do’ when they have to, and the last thing they’ll do is sell their home. Or if they do, it will be a downgrade to a 1bedroom, etc.

And one more consideration — more often than not, the kids of the boomers may not have equity/real-estate. The house will just get transfered to one of the kids/grandkids/great grandkids.

Boomer21 – #74, I would be interested to know how many of your friends are enjoying defined benefit pension (DBP) plans and how many saved on their own to fund their retirements? You and your friends may have simply lucked out being the first wave of boomers to retire with DBP plans. I am seeing a huge number of companies eliminating their DBP plans and going to defined contribution plans. The impact will be enormous due to the volatility in the stock markets and ZIRP.

For example, my employer has been contributing $20k per year into a DBC plan on my behalf for 18 years. These funds have been invested in low fee mutual funds (very limited investment choices) for the entire time. The total capital invested is $360,000. The FMV of the plan assets the last time I looked (a couple of weeks ago) was $400,000. Total investment earnings over 18 years was a piddling $40,000!!! That is investment risk for yah and every person not in a DBP plan will be subject to the same kind of risk. Good luck trying to retire on that kind of plan.

It means that if you plan to retire you had better change your spending habits and plan to save close to 50% of your income. Try reading mrmoneymustache.com, it will open your eyes to the possibilities.

@Edward #143:
You got it exactly right. Those 300sf condos are tomorrow’s mega-retirement homes: central, close to transit (because you’re too old to drive) built above shops and theatres, so that everything you need is an elevator ride away. The Marine Gateway project in Vancouver is a great example. It even has a casino not one Skytrain station away, because those oldsters LOVE to gamble.

Add a few hotel suites where the kids can stay when they come to visit, medical staff on call, and maybe a palliative care floor for when the end is nigh, all under one roof.

This is where the HAM will dump their parents when the time comes: retirement is so much more lucrative in Canada.

Jane54 – #138, that may be the case today but give it another 30 years or so and there is no way that the government will be funding that level of care. There will be home care available but you can rest assured that anyone who can afford it would not be caught dead (no pun intended) in such a place. It will be all about the numbers.

>Money velocity is heading for the curb, and as Mr. Turner keeps reminding us – “that ain’t good”.>

“In the crisis-hit euro zone, fears rise of a credit crunch. The sharp decline in bank loans to companies surprised even the experts.
“The sum of bank loans to companies and households in the euro zone shrank more than expected in September. Bank lending in comparison to the same month last year shrank by 0.8 percent, said the European Central Bank (ECB). Analysts had expected a decline of only 0.6 percent.

The lending to companies fell month on month by 20 billion euros after it was dropped in August only to six billion euros. In many countries recessionary demand for loans is naturally low.

“At least in some euro area countries, the capital constraints affect the supply of credit from the banks to the real economy,” said Commerzbank expert Michael Schubert. The complaints about the business in France over high hurdles in lending would have declined in recent months, is slow. A similar picture is apparent in Italy.

I did not contribute to my RRSP’s ever. The reason – I don’t trust the government, period. What do you think they’ll be raiding when they themselves run out of money? Look at Greece and the failed EU experiment. Their retirement funds are “poof”, gone!

Think it’s different here?

What I do is I take money that I would’ve put into RRSP’s or TFSA’s and keep it. No gain over time, but no loss either and the money is right here right now in case I break a leg or loose employment for other reasons. No tax, no early withdrawal penalty, no nothing.

I come from a country that went though a default. I’m not Canadian born, even though I lived here for most of my life. I do not trust ANY government. The money that is forcefully confiscated from me via automatic CPP deductions – I perceive it as “gone” right there on the spot. I only treat savings as savings if I have immediate access to them without the middle men.

If I don’t hold it, I don’t own it (and knowing how property rights work, even holding sometimes isn’t enough).

Preservation of wealth is important. Keeping it hidden and mobile will be just as important in the following years when the real witch hunt begins: who did what to whom and who should pay for it all.

I don’t trust RRSP’s or any scheme, government or private that has the need to hide behind an acronym.

I don’t understand why Garth and so many of the bloggers are so sure that the majority of Boomers will be selling their homes in order to fund their retirements, or because they need the cash to pay for a nursing home.

I am 57, but when I was young most old people lived in their own homes until the day they died. Many of those folks lived into their eighties, yet they never moved into an old folks home, or a nursing home, or a retirement community (I’m not sure they even existed back then!). Many never had access to home care, or meals on wheels, or family close by (if they needed assistance with anything they relied on neighbours, but for the most part they took care of themselves). So why is it that we seem to think the Boomers will be any different?

These days, older folks are in much better health (or so we’re told) than the old folks I remember from my youth, so if anything they should be MORE not LESS able to remain in their own homes until the end.

As for needing to sell in order to get the money, I think many will prefer living in familiar surroundings to spending the money on lavish trips etc. For the most part, Boomers have done lots of travelling over their lifetime, and won’t mind at all taking vacations closer to home in their golden years. Travelling often seems more of a hassel as we get older anyway.

Retirement living is a lot less expensive than pre-retirement living, as people tend to eat out less, socialize less, etc. than they did during their working years. They also spend less on material goods, both household and personal. It just doesn’t seem as important somehow as it once did to “keep up with the Jones’s”. So, provided they are happy living in their longtime family home, I think you’ll find that many of the Boomers will be content to remain there throughout their “golden years” even with a lot less money in their pocket. I know I will.

“I don’t understand why Garth and so many of the bloggers are so sure that the majority of Boomers will be selling their homes in order to fund their retirements.” This is not what I said. The post calculated the impact of one-third of Boomers selling. Where I come from that’s not a majority. — Garth

Also, as someone who lived through a government I default, I’d like you to introduce you to the Eastern European Retirement Plan: EERP.

It’s simple. Everyone is covered and no one is refused.

It’s called “suicide”.

I’m expecting to see a lot of those in the following years. I keep hearing the phrase “We are Japan” in reference to the economic situation. As you will soon discover, there’s more that one way in which we may become like them.

A good advisor will not buy mutual funds. ETF costs are miniscule. — Garth

SOME ETF costs are low, usually index funds. Even those fees are still a drag over the longer term. Might as well unbundle the ETF and buy the stocks individually. Transaction costs on stocks are miniscule, and holding costs are nil. Unlike ETFs, where those fees take a bite every year.

For example, on a 100K portfolio, you could buy 100 stocks (a stupidly high number, in my opinion) for $1000. Sell those stocks centuries later for another $1000. Pay no fees in between. However, an ETF charging a very low 0.25% annual fee will equal those costs in only 8 years, and that is if you are lucky enough to find one that charges that little. Obviously, the numbers get more and more favorable with increasing portfolio size and decreasing number of stocks.

I don’t think anyone under the age of 65 should hold preferred shares or bonds.

..”This week, the price of North Dakota oil stood at about $75 per barrel, about 12 percent below the U.S. crude benchmark and more than 30 percent below the international crude benchmark. If that same oil reaches the U.S. coasts or global markets, it can fetch as much as $30 more per barrel. That’s why some North Dakota producers are loading their oil onto rail cars, river barges and trucks for the long trip to coastal refineries…But exporting crude oil is a different story. While there are no restrictions on exporting fuel produced by U.S. refineries, the same is not true for raw domestic crude oil.

To export U.S. crude, sellers have to contend with a patchwork of overlapping restrictions that makes it illegal to export U.S. crude to any foreign country without government permission and special licenses.

In the past, only a trickle of U.S. crude flowed out of the country through these licenses. But that’s changing. In July, producers exported 77,000 barrels per day of U.S. oil to Canada—the highest level in more than a decade, according to federal statistics. Royal Dutch Shell, BP, oil trader Vitol and three other companies have applied for or received the necessary government clearance to export domestic crude oil—mainly, if not exclusively, to Canada—according to recent news reports.

“As for needing to sell in order to get the money, I think many will prefer living in familiar surroundings to spending the money on lavish trips etc. For the most part, Boomers have done lots of travelling over their lifetime, and won’t mind at all taking vacations closer to home in their golden years. Travelling often seems more of a hassel as we get older anyway.

Retirement living is a lot less expensive than pre-retirement living, as people tend to eat out less, socialize less, etc. than they did during their working years. They also spend less on material goods, both household and personal.”

I’ve got a few years on you, and am not putting down your plan – but personally I prefer the opportunities provided by having the money and the choices it allows.

Congressional Research Service
U.S. Oil Imports and Exports
Neelesh Nerurkar
Specialist in Energy Policy
April 4, 2012
This report first explains these oil import and export volumes, including sources and destinations
of traded oil. It then turns to the value of oil trade in the total U.S. trade balance for goods and
services. Finally, several key policy issues regarding imports are discussed.http://s3.documentcloud.org/documents/472205/crs-on-oil-imports-exports-april-2012.pdf

I want to go back to Garth’s last posting about the Tax Act, and suggest all to buy it; not to read all, but to ferret out sections that effect your personal situation in life. Now, how many of you realize that with exceptional bumps over a 3 year period that might be the result of capital gains you are paying too much tax, and with a special form, can do a costing to get tax back?

I did this once and sent it to Winnipeg, and these people will freak out to see a special form coming to be evaluated, so disregard it all. I called a 3 year audit on the Tax Man which is rare, but they owed me lots of money, and it takes time to be kicked up to an expert, and got my money about 5 months later.

I did not contribute to my RRSP’s ever. The reason – I don’t trust the government, period. What do you think they’ll be raiding when they themselves run out of money? Look at Greece and the failed EU experiment. Their retirement funds are “poof”, gone!

Think it’s different here?

What I do is I take money that I would’ve put into RRSP’s or TFSA’s and keep it. No gain over time, but no loss either and the money is right here right now in case I break a leg or loose employment for other reasons. No tax, no early withdrawal penalty, no nothing.

I come from a country that went though a default. I’m not Canadian born, even though I lived here for most of my life. I do not trust ANY government. The money that is forcefully confiscated from me via automatic CPP deductions – I perceive it as “gone” right there on the spot. I only treat savings as savings if I have immediate access to them without the middle men.

If I don’t hold it, I don’t own it (and knowing how property rights work, even holding sometimes isn’t enough).

Preservation of wealth is important. Keeping it hidden and mobile will be just as important in the following years when the real witch hunt begins: who did what to whom and who should pay for it all.

I don’t trust RRSP’s or any scheme, government or private that has the need to hide behind an acronym.

——————————–

You’re 100% right Julia!

You probably were born in former USSR as me.
I’m happy I’m not “canadian”!
I’m only holding canadian passport.
Canada is a huge rental building with different “tenants” (groups of immigrants, ethnics etc.) , having nothing in common, except rental agreement (citizenship) with building (“canada”).

“Don’t bother saving fro that nursing home. My mum has been is a wonderful one in the TO area for 8 years now and not paid a cent other than her basic CPP and SS. She spent all her money so the Ontario govt picks up most of the tab.

The lady in the next room, now she pays a mint for the same room, food and facilities because she was silly enough to save.

I have learned from this.”

What have you learned? …. If you’re pathetically broke and hopeless and didn’t work hard enough, see or plan ahead ….. you will get a free ride? I find that sickening. Shame on you and your mom. What about personal pride? What about carrying your own weight on this planet. Who owes your mom or any of us a free ride? And to recommend that on this blog? Where do you think that will lead? How do you think that will work in the long run?

Bang on, I agree with ya and I was born and raised in Canada. I don’t trust the government and any money I’ve ever put into RRSP’s or pension mutual funds was taken out the moment I had the opportunity.

Pay my mortgage off and live mortgage free, maybe then invest a few bucks, the way Garth recommends. But my money will never sit in an RRSP ever again and I will train my kids to think this way as well.

I screw the government at every opportunity I get in life and I don’t lose any sleep over it.

Marshy @ # 124,
Nothing hate -filled about it – just an accurate, in depth, insightful and factual accounting of the barren, hillbilly laden gulag known as Saskatchewan.
The fact you squeal like a stuck pig every time I do this confirms that I have it right on the money.
Sounds to me like you have dropped big money on some shithole in Sask. and are starting to get that queasy feeling in your stomach…

A state can only provide public services if the people pay taxes, but many people see this as a vicious cycle said Mouzakis pointing to two examples: “People often have to pay bribes to receive treatment in a state hospital. If children want to receive a good grade when graduating from school, the have to pay extra for private tuition. This is the way it goes, and at some point, you can imagine why people think: Why pay taxes?”

http://www.teleiakaipavla.gr/
Corruption was an enabler for tax evasion, said programmer Makis Antypas, an activist for transparency and tax fairness. Antypas is one of the volunteers who manage http://www.teleiakaipavla.gr, where people can report their encounters with matters relating to bribery and corruption. The idea originated from the well-known computer science professor Diomidis Spinellis, who also worked as head of the tax investigation unit.”Anyone can contact us and make their complaint anonymously, but the accused also remains anonymous because we don’t want to denounce anyone,” Antypas said. “We want to know is in which hospital or office bribes are being paid.”

The website is only 1-month-old and has already registered more than 70,000 users. The IT group is currently working to design an app that should make the life of tax evaders and corruption even harder.

Boomers are often made out to be the villains, but they are also victims. Why were mortgage rates over 20% in the 80s? Because boomers were buying. Why did rates creep downward through the 80s and 90s? Because they were becoming investors. And why are returns only 1 or 2% over the last ten years? Because they are finally net investors and need good returns to prepare for retirement. Rates have always worked against boomers.

#74 Boomer21
And you know the financials of all of your friends? Unless you see it on paper don’t believe it, so so so many people lie about their income and savings it’s ridiculous, and if you have seen it on paper then I guess you just have a lucky group.

Don’t bother saving fro that nursing home. My mum has been is a wonderful one in the TO area for 8 years now and not paid a cent other than her basic CPP and SS. She spent all her money so the Ontario govt picks up most of the tab.

The lady in the next room, now she pays a mint for the same room, food and facilities because she was silly enough to save.

I have learned from this.
===================================

That is the type of phenomenon I keep hearing anecdotally.

IF a person is in need of senior care , and it is determined they have assets that can be liquidated…such as a home….they are not eligible for Public Care until they sell of their assets,…… in essence, the Universal Care is a myth…you now pay for “Public Care” with your hard earned/now liquidated Private Funds.

Like the classic “Grasshopper and Ant ” fable….except its free if you are the GRASSHOPPER, but if you are the ANT…you are $OL…

With all due respect – this is entirely NOT the case… We had to submit our permanent resident applications just as outlined at http://www.cic.gc.ca and after about 11 months were granted the entry visas. The fact that an old crumbling ’87 condo on the outskirts of Moscow can get you these days about $700/sq.f. was of no help to us at all. I understand that this may be entirely irrelevant concern for 99% of readers of this blog, but the big question now is whether to buy into this obviously overheated marked here (yet cheaper vs. Russia) or adopt a wait-and-see attitude. I will not dwell on the fact that Russia’s #1 state-owned bank offers 9% on 3-year deposits, which makes the yield, even allowing for the potential unlikely fluctuations of local currency, very attractive (2009 – 30.2 RUR/USD, 2012 – 31.4 RUR/USD)

CMHC is fraught with moral hazard and consequent misallocation of Canada’s resources. But, there is another “Elephant in the room”: the Export Development Corporation (“EDC”). Bombardier could never exist without this government creation guaranteeing the company’s receivables.

#133 };-) aka D.A. on 10.26.12 at 11:46 am
———————————————–
Thanks for answering my question yesterday. Funny about that ‘on’ and ‘in’ the market thing. Over the past 6 months I’ve watched a place go from listing at $520k to $490 and now $440. I would say the sellers have gone through the various stages, and are now ready to sell.

#188 Molly on 10.26.12 at 7:53 pm“#74 Boomer21
And you know the financials of all of your friends? Unless you see it on paper don’t believe it, so so so many people lie about their income and savings it’s ridiculous……….”

My bullshit detector generally works fairly well. I’ve also found that people love to talk about themselves if you listen, and refrain from criticizing.

I’ll concur with this theory, that financial well being is one of the most common issues about which people lie.

Reason – So much of what people buy/wear/use/drive is about effecting the appearance of wealth:

Now, if you scratch below the surface of many people who have lots of this awesome stuff, you may find that their tax-wage slave job yields income in the slightly-above-average band, and that they come from seemingly modest middle class backgrounds.

So, what does it all mean? Well, if they’re not a genius like Smoking Man who knows how to find Batman, the way they’re “affording” their luxuries is in one of two ways:

-Selling drugs, or,
-something along the lines of “Unlocking the equity in their home”.

If it’s the second, of course they’re going to spew BS about the health of their financial situation…..they’ve just borrowed themselves into near ruin to put up a prosperous looking front.

Do you think they’re going to admit the stupidity of it all, and that they’re hooped (if they can even realize it themselves)?

As for other commonly lied about attributes, my Family Feud list in no particular order is:

You are correct, I’m from the USSR. Few of my friends migrated prior or after the collapse. Some ended up in Canada, some in the US, some in Germany.

We all share similar memories, but draw different conclusions. I personally side with Dmitry Orlov’s: Five Stages Of Collapse scenario with a bit of Simon Mikhailovich flavor to it (if you don’t know them, I suggest looking them up online). I had a pleasure to speak with both.

What I carried out of the USSR with me is mistrust. I don’t like governments and don’t like banks, I don’t like laws that the lawmakers make to protect themselves from the law abiding citizens.

What I do like is savings in hand, I like barter, I like fixing things instead of throwing them away. I like growing food and producing the least amount of trash possible. In USSR a family of 3 produced a small bucket of trash a week (due to lack of excessive packaging and excellent longevity of durable goods). Here a single person often produces a bucket of trash per day.

If you want to limit your financial waste, the easy exercise is trying to limit physical waste first. Try getting your family down to 1 bucket of trash per week. You’ll be surprised how much it is related to the amount of money you spend.

@Kris
Spain has tens of thousands of houses newly built, waiting for a client.
Ireland too.
Italy, France, adriatic coast, egean coast have many-many-many houses waiting for a client. The weather is muuuuch better there, and the palces to visit are many more. And they are civilized countries, democracies.
The medical system is at least on par with the canadian one.
They all are in a real estate crisis, looking for clients, they have a tremendous oversuply of newly built houses.
The competition is tough…

Thanks, I have also been to several cities in Thailand, including Pattaya and also to Ho Chi Minh in Vietnam and Siem Riep in Cambodia.

You are absolutely correct, about the enormous value of money in that part of the world. Since I’m 41, I think I better put in another 14 years till 55 and then retire by living in one of those places.

I like Canada very much and think it’s a great country, but sadly the Ant and the Grasshopper story (as a couple of posters have mentioned) really holds true and there is no point in working till death to support a lot of free loading people.

Better to pack up early and call it a day, if one can live abroad in thrift………..and I know I can.

Will just hope the Baht and the Duong remain weak relative to the CAD$ :-)

You just don’t get it do you. The economy and the economic theory behind it are ideological ideas about the way things should be. Capitalism is just a tool, a bad tool, but a tool none the less.
As the boomers enter their retirement, they will demand a shift and the government will give it to them one way or another.
Who cares about saving for retirement. Life is lived today not 20 years from now.

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The views expressed are those of the author, Garth Turner, a Raymond James Financial Advisor, and not necessarily those of Raymond James Ltd. It is provided as a general source of information only and should not be considered to be personal investment advice or a solicitation to buy or sell securities. Investors considering any investment should consult with their Investment Advisor to ensure that it is suitable for the investor's circumstances and risk tolerance before making any investment decision. The information contained in this blog was obtained from sources believed to be reliable, however, we cannot represent that it is accurate or complete. Raymond James Ltd. is a member of the Canadian Investor Protection Fund.